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Friday, June 24, 2011

Timber Sector – Stronger earnings ahead?

 Jaya Tiasa released its 4QFY11 results yesterday which saw its FY11 net profit came in 12% above consensus estimates. The stronger-than-expected results could be a re-rating catalyst for the sector, reflecting the tight log supply condition, stronger demand for wood products and higher timber prices in Feb-Apr. The fact that supply remains tight and demand is still strong, mainly attributable to Japan’s reconstruction efforts and strong demand from emerging economies such as India and China, earnings of timber companies will likely be a function of timber prices. Hence, we expect other players like Ta Ann, Lingui, and WTK to report strong earnings in the upcoming quarters too because of the current high timber prices. Technically, our chartist like Eksons, Lingui and WTK Holdings, as these stocks are likely to take out their respective resistance trend lines soon, which could mean more upside ahead.

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